Morgan Stanley resumes Capital One stock coverage with Overweight rating

Investing.com - Morgan Stanley (NYSE:MS) has resumed coverage of Capital One Financial (NYSE:COF) with an Overweight rating and a price target of $261.00. According to InvestingPro data, Capital One currently trades at $218.03, with analysts’ targets ranging from $160 to $265, suggesting potential upside based on the consensus view.

The firm views Capital One’s acquisition of Discover as a "game-changer" that unlocks significant accretion through network ownership and other synergies.

Morgan Stanley believes longer-term benefits can come from a stronger deposit franchise, network expansion, and additional products for the financial services company.

Despite Capital One stock rising 22% year-to-date, Morgan Stanley sees further upside potential, noting the stock is "still not fully priced for coming synergies & ramp in capital return."

The firm argues Capital One deserves a higher multiple given the payments and network opportunity presented by the Discover acquisition.

In other recent news, Capital One Financial has been in the spotlight following several developments. The company recently completed its merger with Discover, which has led to analysts revising their outlooks. TD Cowen upgraded Capital One from Hold to Buy, raising the price target to $258.00, citing potential benefits from the Discover acquisition. JPMorgan also adjusted its price target for Capital One to $210.00, attributing the change to anticipated synergies from the merger, such as cost savings and new revenue opportunities. UBS maintained its Buy rating with a steady price target of $240.00, highlighting the company’s updated pro-forma financials and a higher Common Equity Tier 1 (CET1) ratio of 13.4%.

Additionally, Capital One announced that its preliminary Stress Capital Buffer Requirement will decrease to 4.5% by October 2025, as determined by the Federal Reserve’s Comprehensive Capital Analysis and Review process. This adjustment reflects Capital One’s strong capital position, as evidenced by recent stress test results from the Federal Reserve. The test showed that Capital One, along with other major banks, is well-capitalized to endure severe economic downturns. These developments collectively indicate a period of strategic growth and financial stability for Capital One.

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